Banking

Central Bank
• A central bank, reserve bank, or
monetary authority is the entity
responsible for the monetary policy of a
country or of a group of member states.
It is a bank that can lend money to
other banks in times of need.
• Its primary responsibility is to maintain
the stability of the national currency
and money supply, but more active
duties include controlling subsidized-
loan interest rates, and acting as a
lender of last resort to the banking
sector during times of financial crisis.
 Functions of a central bank
• implementing monetary policy
• controlling the nation's entire money supply
• the Government's banker and the bankers'
bank ("lender of last resort")
• managing the country's foreign exchange
and gold reserves and the Government's
stock register
• regulating and supervising the banking
industry
• setting the official interest rate – used to
manage both inflation and the country's
exchange rate – and ensuring that this rate
takes effect via a variety of policy
mechanisms
 Naming of central banks
• Many countries use the "Bank of Country"
form (e.g., Bank of England, Bank of
Canada, Bank of Russia).
• Some are styled "national" banks, such as
the National Bank of Ukraine;
• Central banks may incorporate the word
"Central" (e.g. European Central Bank,
Central Bank of Ireland).
• The word "Reserve" is also often included,
such as the Reserve Bank of Australia,
Reserve Bank of India, Reserve Bank of New
Zealand, the South African Reserve Bank,
and U.S Federal Reserve System.
 Commercial Bank
• A commercial bank is a type of
financial intermediary and a type of
bank.
• Commercial banking is also known as
business banking.
• It is a bank that provides checking
accounts, savings accounts, and
money market accounts and that
accepts time deposits
• Commercial bank is the term used for a
normal bank to distinguish it from an
investment bank.
• It raises funds by collecting deposits
from businesses and consumers via
checkable deposits, savings deposits,
and time (or term) deposits. It makes
loans to businesses and consumers. It
also buys corporate bonds and
government bonds. Its primary
liabilities are deposits and primary
 The role of commercial
banks
• processing of payments by TT, EFTPOS, internet
banking
• issuing bank drafts and bank cheques
• accepting money on term depositlending money
by overdraft, installment loan, or other means
• providing documentary and standby letter of
credit, guarantees, performance bonds, securities
underwriting commitments and other forms of off
balance sheet exposures
• safekeeping of documents and other items in safe
deposit boxes
• currency exchange, sale, distribution or
brokerage, with or without advice, of insurance,
 Investment Bank
• An Investment Bank is a financial
institution that deals with raising
capital, trading in securities and
managing corporate mergers and
acquisitions.
• Investment banks profit from
companies and governments by raising
money through issuing and selling
securities in the capital markets (both
equity, bond) and insuring bonds
(selling credit default swaps), as well as
• A majority of investment banks offer
strategic advisory services for
mergers, acquisitions, divestiture or
other financial services for clients,
such as the trading of derivatives,
fixed income, foreign exchange,
commodity, and equity securities.
 Merchant bank
• In banking, a merchant bank is a
financial institution primarily
engaged in offering financial services
and advice to corporations and
wealthy individuals on how to use
their money.
• The term can also be used to
describe the private equity activities
of banking.
 Universal Bank
• A universal bank participates in many
kinds of banking activities and is both a
Commercial bank and an Investment
bank.
• Historically there was a distinction
drawn between pure investment banks
and commercial banks.
• In the US, the regulatory barrier to the
combination of investment banks and
commercial banks has largely been
removed, and a number of universal
banks have emerged in both
jurisdictions.
 Building society
• A building society is a financial
institution, owned by its members,
that offers banking and other
financial services, especially
mortgage lending.
Supranational bank
Finance house
 Transaction account- Current
account
• A transactional account (NA: checking
account or chequing account, UK :
current account or cheque account) is a
deposit account held at a bank or other
financial institution, for the purpose of
securely and quickly providing frequent
access to funds on demand, through a
variety of different channels. Because
money is available on demand these
accounts are also referred to as
demand accounts or demand deposit
accounts.
 Features
• cash money (coins and banknotes)
• cheque and money order
• giro (funds transfer, direct deposit)
• direct debit (pre-authorized debit)
• standing order (automatic funds
transfer)
• ATM card or debit card
• SWIFT: International account to
account transfer.
 Deposit account
• A deposit account is a current
account at a banking institution that
allows money to be deposited and
withdrawn by the account holder,
with the transactions and resulting
balance being recorded on the
bank's books. Some banks charge a
fee for this service, while others may
pay the customer interest on the
funds deposited.
 Saving account
• Savings accounts are accounts
maintained by retail financial
institutions that pay interest but can
not be used directly as money (by,
for example, writing a cheque).
These accounts let customers set
aside a portion of their liquid assets
while earning a monetary return.
 Personal account
• A personal account is an account for
use by an individual for their own
needs. It is a relative term to
differentiate the said accounts from
those accounts for corporate or
business use.
• The term "personal account" may be
used genericly for financial accounts
at banks and for service accounts
such as accounts with the phone
 Standing order
• A standing order is an instruction a
bank account holder gives to their bank
to pay a set amount at regular intervals
to another account. The instruction is
sometimes known as a banker's
order.They are typically used to pay
rent, mortgage or other fixed regular
payments. Because the amounts paid
are fixed, a standing order is not
usually suitable for paying variable bills
such as credit card, or gas and
electricity bills.
• Standing orders are available in the
banking systems of several countries, inc
Germany, the United Kingdom,
Barbados, the Republic of Ireland,
Netherlands,
Russia and presumably many others. In t
United States, and other countries where
cheques are more popular than bank tra
 Liability
• Liability is an obligation of an entity
arising from past transactions or
events, the settlement of which may
result in the transfer or use of assets,
provision of services or other yielding
of economic benefits in the future.
• All type of borrowing from persons or
banks for improving of a business or
person income which is payable
during short or long time.
• Assets = Liabilities + Owner's Equity
• The accounting equation is the
mathematical structure of the
balance sheet.
 Liquidity
• Accounting liquidity (liquidity) is a
measure of the ability of a debtor to
pay their debts as and when they fall
due. It is usually expressed as a ratio
or a percentage of current liabilities.